(Reuters) – Warning of a “death spiral” without drastic changes, a group of experts on the U.S. federal budget deficit on Wednesday called for a 2011 Social Security tax holiday, a soft drink tax and government spending freezes.
In an ambitious plan to slash the deficit and the fast-mounting national debt, the group also called for a new 6.5 percent national sales tax, as well as lower and simpler individual income and corporate tax rates.
Former Federal Reserve Vice Chairman Alice Rivlin and former Republican Senator Pete Domenici — both veterans of Washington’s long-running deficit wars — headed the 19-member group organized by the Bipartisan Policy Center, a think tank.
Domenici called the deficit “a quiet killer” undermining the economy and compared the effort required to vanquish it to the sacrifices made by Americans during World War II.
At an event to unveil the center’s plan, Rivlin said its twin goals were to boost the economy and “drastic tax reform.”
It comes as a presidential commission targeting the same problem reconvenes on Wednesday for another closed-door session with just over two weeks before its final report is due.
Americans are worried about the deficit and want action, polls show, but politicians cannot agree on tax hikes and spending cuts, even though experts say both are needed.
Federal Deposit Insurance Corp Chairman Sheila Bair said at a conference in New York on Wednesday that she did not see short-term risk from the deficit. But she said, “There is a systemic risk to the financial system if structural deficits are not credibly addressed over the next few years.”
Dramatic proposals unveiled last week by the leaders of the presidential commission were widely dismissed as unworkable taken as a whole. But they did succeed at grabbing the spotlight for an issue that U.S. voters earlier this month in the midterm elections made clear is a top concern.
Yes, the basic theory of this tax is that since most Americans don’t drink sugar drinks, and even think it is a bad habit, the majority will not be bothered by the tax.
This is similar to the outrageous cigarette taxes.
They came first for the Communists,
and I didn’t speak up because I wasn’t a Communist.
Then they came for the trade unionists,
and I didn’t speak up because I wasn’t a trade unionist.
Then they came for the Jews,
and I didn’t speak up because I wasn’t a Jew.
Then they came for me
and by that time no one was left to speak up.
It will also raise inflation, which is part of the Fed’s program to create demand.
The proposals are DOA.
But we do need some inflationary actions. You don’t see it in NY where housing prices have begun to rebound, but much of the US has experienced a 1930s style bust. Deflation is FAR worse than inflation.
As long as they don’t propose a kugel tax.
a kugel tax was just proposed